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Former Treasury Official Claims Fed
Unlawfully Suppressing Gold Prices

CFTC EmblemNovember 15, 2014 | by Steve McCurdy

Author and economist Paul Craig Roberts, in an interview with King World News, claims that bullion banks, acting as agents for the Federal Reserve, are criminally suppressing market prices of gold and silver. This claim is particularly striking because Dr. Roberts is not your garden-variety conspiracy theorist.

Bona Fides of Dr. Paul Craig Roberts
 

 

Dr. Roberts holds a BA in Economics from Georgia Tech and a PhD in Economics from the University of Virginia, and he also studied at Oxford University.  He served as Assistant Secretary of the Treasury for Economic Policy under President Reagan, and was credited with being a co-founder of “Reaganonmics.” He is a former editor and columnist for the Wall Street Journal and Business Week, and has published twelve books on Economics. Dr. Roberts was inducted into the French Legion of Honor in 1987, and in 1993 The Forbes Media Guide ranked him as one of the top seven journalists in the United States.
 

Normal Consequences of Money Printing

 

In the interview Dr. Roberts asserts that the Fed increased its balance sheet by $4 trillion essentially to save four big banks. He says that normally when any central bank creates 4 trillion new dollars its currency collapses, and it becomes worth virtually nothing measured against euros, yen, pesos and other currencies. The downward pressure on the dollar always manifests itself in higher gold prices. This is how the natural laws of supply and demand work in monetary systems.

But this time none of that has happened. Instead, the dollar has risen to its all time high and gold prices have dropped. Dr. Roberts suggest that to understand what is going on we must first know how the gold market works.

The Dual Gold Markets – Physical and Paper


The precious metals market is the only one in which prices are not established by the tradingCFTC Trading Room of the actual physical product. Instead, prices are established by a paper market (the Comex) where prices are based upon the trading of paper futures contracts. Dr. Roberts asserts that this paper market is phony, and its only purpose is to enable central bankers to manipulate the value of their fiat currencies.

He points out that physical demand for both gold and silver has recently exploded. The US Mint has announced the suspension of sales of silver eagles because they can’t get sufficient silver to make the coins, and the Royal Canadian Mint is rationing their supply of silver maple leafs for the same reason. So, while the physical market for gold and silver is one of the greatest bull markets of all time, prices on the paper market are dropping. This does not happen in a free market.

How the Fed is Unlawfully Suppressing Gold and Silver Prices
 

According to Dr. Roberts, the agent banks of the Federal Reserve can print gold futures contracts at will, just as the Federal Reserve can print US dollars. And he says that is exactly what they do. The banks are using naked shorts to manipulate the market. Because of the vast size of these agent banks, they can theoretically print  futures contracts for the equivalent of up to 40 tons of gold (market value of $1.5 billion) at any price they choose and then dump those contracts on the paper market at 3 o’clock in the morning when almost all markets are closed and there are no buyers.

Wall Street TradingDr. Roberts tells us that in a freely-operating market where demand is exploding and supply is constrained, it is impossible to have falling prices. It can only happen, he says, when a market is rigged. He reminds us that market manipulation is not just unethical, but it is illegal, and he suggests that those responsible be arrested and made to stand trial under criminal charges.

You might be moved to ask why these markets aren’t regulated. In fact they are regulated by the “Commodity Futures Trading Commission” (CFTC), an agency of the federal government. The former acting head (and President Obama’s choice for permanent head) of the CFTC was Mark Wetjen, a one-time garbage man and bartender, and now a lawyer. Prior to joining the CFTC Mr.Wetjen was for seven years chief legislative aide to senator Harry Reid. According to Shah Gilani of “Money Morning,” Wetjen worked tirelessly to weaken CFTC’s regulatory authority until he was finally replaced as its acting head in June, 2014 by Timothy Massad.

The US Government has a huge stake in preserving the dollar, and breaking its own rules is apparently not an obstacle to achieving its goal. Not a good omen for the rest of us.

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